Clarification for ITC to be claimed on GST on Airport Levies
What was the need for Govt. to issue a circular for GST on Airport levies?
The government had received various representations seeking clarification on the following issues relating to
⊗ Should GST be levied on Airport levies?
⊗ Airport levies do not form part of the value of services provided by the airlines. Consequently, no GST should be charged by airlines on airport levies.
⊗ Who can take the ITC of GST paid on Airport levies?
Which airport levies are discussed in Circular 115 dated 11th October 2019?
Airport levies such as Passenger Service Fee (PSF) and User Development Fee (UDF) are charged by airport operators for providing the services to passengers.
- Passenger Service Fee (PSF) is charged for infrastructure and facilitation provided to embarking passengers.
- User Development Fee (UDF) is charged at major airports to embarking passengers.
In order to avoid inconvenience to passengers and for smooth and orderly air transport/airport operations, the User Development Fees (UDF) & Passenger Service Fee (PSF) shall be collected from the passengers by the airlines at the time of issue of air ticket and the same shall be remitted to Airports Authority of India as per the routine procedure.
>>>Click here to read the GST Circular no. 115 dated 11th October 2019 issued by CBIC for issues in relation to GST on Airport levies
Reason why airport levies attract GST
Section 2(31) of the CGST Act states that “consideration” in relation to the supply of goods or services or both includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person.
In this case, services are provided in the form of User Development Fee (UDF) and Passenger Service Fee (PSF) will be liable to GST.
- by an airport operator
- to embarking passengers
- against consideration
Let’s understand the implications of airport levies and GST from everyone’s angle.
Passengers will have to pay for UDF and PSF and applicable GST as they are the ultimate recipient of the airport services on the basis of the invoice issued by the airline to them.
If you are registered passengers(GST number is given while booking the ticket), you may take ITC of GST paid on PSF and UDF on the basis of the invoice issued by the airline.
Airlines acts as a pure agent
The Airline does not provide the services of PSF or UDF. It only collects the charges of PSF & UDF and GST thereon on behalf of the Airport oprator in the capacity of a pure agent.
The Airline is not responsible/liable for payment of GST on UDF and PSF( (for airport services provided by airport licensee), provided the airline satisfies the conditions prescribed for a pure agent under Rule 33 of the CGST Rules.
While billing to the passenger, Airline should separately indicate the actual amount of PSF and UDF and GST payable on such PSF and UDF by the airport licensee, in the invoice.
The Airline would only recover the actual PSF and UDF and GST payable on such PSF and UDF from passengers and remit to the Airport Operator. The amount so recovered(i.e. the amount of PSF & UDF and GST on it) will be excluded from the value of supplies made by the airline to its passengers.
The Airline shall not take ITC of GST payable or paid on PSF and UDF.
Aiport operator (AAI, DAIL, MAIL etc)
It is the licensee, that is the airport operator (AAI, DIAL, MIAL etc) who shall be responsible/liable to pay GST on the PSF and UDF for airport services provided to embarking passengers as per rules of Aircraft Rules, 1937.
Airport operators are collecting PSF and UDF inclusive of GST from passengers via Airlines. So they have to pay GST collected by them to the Government
Note: Airport operator pays Airlines collection charges as consideration for providing services of a pure agent who collects PSF & UDF and GST thereon from passengers. Airlines will be liable to pay GST on the same under forward charge and ITC of the same will be available to the airport operator.